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Advance Payments

Accounting Manual Chapter D-371-11 states that advance payments should be avoided because:

  • It is prudent business practice to pay for goods or services only after they have been received in good order or rendered satisfactorily.
  • Interest income (STIP) is lost on funds used to make advance payments, especially if delivery of materials or performance of services ordered is to take place at some distant future date.

Advance payments may be appropriate in exceptional circumstances, such as:

  • When the item purchased is being specially manufactured to meet specific requirements.
  • Situations in which vendors offer substantial prepayment discounts.
  • Deposits are required by a caterer for a large official event or by a hotel to confirm space for an official function such as a conference.
    • Please note that effective immediately, any event-related deposits that meet the following criteria do not require Purchasing approval:
      1. The deposit is for 25% or less of the total transaction amount.
      2. No "contract" needs to be signed. A "contract" is defined as a document that requires the individual to (a) agree to the vendor's terms and conditions and (b) assume liability or indemnify the vendor.
    • Event-related POs should continue to have a line for the deposit amount and a line for the balance; two separate POs should not be created for the same event.

Please refer to the Deans, Directors, Department Chairs and Administrative Officers Memo for detailed guidelines.